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TMI Blog2020 (12) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... nst separate orders dated 31/07/2019 passed by Ld.CIT (A)-1, Bangalore for assessment years 2012-13 and 2014-15. 2. Both sides submit that the issue alleged for consideration before this tribunal in both these appeals are common and on identical facts. For sake of convenience we reproduce grounds raised by assessee for assessment year 2012-13 as under: 1. General Ground 1.1. The learned Assistant Commissioner of Income Tax, Circle 2(1)(1), Bangalore (`AO') has erred in passing the order under section 143(3) of the Income Tax Act, 1961 (`the Act') in the manner passed by him and the Commissioner of Income Tax-(Appeals)-1 (`CIT(A)') has erred in confirming the said order. The said order being bad in law is liable to be quashed. 2. Grounds relating to disallowance under section40(a)(ia) 2.1. The learned CIT(A) has erred in confirming the disallowance in respect of payment of stake money amounting to ₹ 34,15,30,436 under section 40(a)(ia) without appreciating the fact that no tax was deductible under section 194BB or 194B of the Act. 2.2. The learned CIT(A) has erred in not appreciating that section 194BB does not cover stake money paid to horse owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under section 234B and 234C of the Act. On the facts and in the circumstances of the case and law applicable, interest under section 234B and 234C is not leviable. The appellant denies its liability to pay interest under section 234B and 234C. 5. Prayer 5.1, In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A) and the order under section143(3) passed by the AO be quashed Or in the alternative a) Disallowance of stake money paid to horse owners of ₹ 34,15,30,436/- be deleted b) Interest levied under section 234B amounting to ₹ 3,93,70,932 be deleted. c) Interest levied under section 234C amounting to ₹ 22,440 be deleted. The appellant prays accordingly. Brief facts of the case are as under: 2.1 Assessee is company engaged in the business of conducting horse races. It has been observed by Ld.AO that assessee would collect ticket money from across the counters and disburse the money to winners immediately it is also been observed by Ld.AO that assessee maintains to set of books of accounts viz primary and secondary, and the financials are prepared as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the decision dated 26/09/2014. 3. Aggrieved by disallowance made by Ld.AO, assessee preferred appeal before Ld.CIT(A). 3.1 Ld.CIT(A) dismissed the appeal filed by assessee by observing as under: 4.0 Having considered the submissions, it is observed that the only issue is regarding disallowance of expenses made by the AO in respect of prize money / stake money paid to the winning horse owners. The appellant relied on the single Judge Order of Karnataka High Court (supra), to say that withholding tax on the price money paid to winning Horse owner is not applicable. However, the AO has relied on the appeal filed by the department before the division bench of the Hon'ble Karnataka High Court, having not accepted the Judgement of the Hon'ble Single Judge of the Karnataka High Court supra. However, it is observed that the appeal filed by the department against the Judgement of the Hon'ble Single Judge of the Karnataka High Court supra, was disposed by vide interim order WA 60/2015 dated 07-12-2016, wherein, the Hon'ble Karnataka High Court observed that: 7. The observations made by the learned Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate order, the same should not be implemented without leave of this court. 6. Interim order passed by the Karnataka in Writ Appeal filed by the revenue: On 07/12/2016, the Hon'ble High Court of Karnataka has passed an interim order with regard to the Writ Appeal filed by the department (WA 60/2015). Copy of the said interim order is enclosed as Annexure 2. 7. After admitting the writ appeals filed by the department, the Karnataka High Court at para 4 of the interim order held as under. 4. On the aspects of the amount of TDS to be deducted towards stake money by the club, we find that as up till now in past, deduction has not been made and the question is to be considered on the aspects of deduction by the club while making payment of the stake money. It appears to us that, the payee of the stake money should file an undertaking to this Court that as and when it is so directed by the Court, the amount of TDS shall be deposited with the club for enabling the club to deposit the amount with the Revenue/Income Tax Department. 8. At para 5 of the interim order on Writ Appeal filed by the department (WA 60/2015), the observations of the learned Single Judge in B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lub with the interest chargeable as per the Income Tax Act within a period of one month from the date on which this Court so directs to deposit the amount, so as to enable the club to deposit the amount of TDS with the Income Tax Department. Upon the copy of the undertaking produced by the owner of the horse/person concerned, the petitioners club shall be at liberty to pay the amount without TDS, but separate calculation and record shall be maintained of the amount of TDS not deducted pursuant to this order. 11. It is also clarified that pending present proceedings, it would be open to the person concerned/owner of the horse to show the income of stake money received in their respective returns in accordance with law and the pendency of these proceedings shall not operate as a bar in the assessment proceedings before the respective authority. However, it is observed that, the assessment order if any passed in respect of any owner of the horse/person concerned shall be placed on record which may be considered by the Court at the time when final order is to be passed on the aspects of re-deposit of the amount of TDS or otherwise as observed earlier. 12. Office to place the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that horse racing income comes under the ambit of other games of any sort and therefore TDS is necessarily to be deducted on stake money paid by club to horse owners. 6. We have perused submissions advanced by both sides in light of records placed before us. 6.1 All the apprehensions raised by learnt CIT DR has been dealt with by Mumbai Tribunal in case of Royal Western Turf Club Ltd vs ACIT (supra) as under: 5. Before us, the first argument put forth by the learned representative for the assessee was that Section 194BB of the Act was brought in the statute by Finance Act, 1978 w.e.f. 01.04.1978, and it applies to a person who has license for horse racing and who is responsible for paying to any person any income by way of winning from horse races. A Circular was issued by the CBDT explaining the provisions of the Finance Act, 1978 i.e. Circular No. 240 dated 17.05.1978. In para 25.1.6 of the said Circular, it is specifically provided that the provisions of TDS shall not apply to income by way of 'Stake Money' as the term 'Stake Money' constitute the prize money received by the owners of the horse on account of the fact that the horse wins t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Act, which is a general provision applicable to 'card game or other game of any sort', which would not cover stake money on horse races; and, for the latter income, Section 194BB of the Act is the specific provision. It was further brought to our notice that even CBDT accepts that specific enactment prevails over the general enactment. In Circular No. 8 of 2005, the CBDT itself has stated that specific provision of law will override general provisions of law. When a specific section in Chapter XVII is provided for by the Legislature to deal specifically with horse races, the Revenue cannot invoke a general section, such as 194B of the Act, to hold the assessee in default. In this regard, reliance was also placed on decision of Hon'ble Supreme Court in the case of U.P. State Electricity Board v. Hari Shankar Jain [1978] 4 SCC 16 and LIC v. D.J. Bahadur [1981] 1 SCC 315. 7. Thereafter, the learned representative for the assessee explained why the provisions of Section 194B of the Act are not applicable. It was pointed out that when Section 194B of the Act was amended in 2001 to insert the words 'card game or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom winnings ; and since Section 194BB uses the word winnings from horse races , hence it will not apply to stake money as per the CBDT Circular. Circular No. 240 dated 15.05.1978 which explains the provisions inserted by the Finance Act, 1978, whose relevant extract is as under: 3. The term winnings , in common parlance, means the amount received by the punter in excess of the bet laid by him on the horse or horses which have won in the particular race. Where a punter places bets on more than one horse in a particular race, the expression winnings will connote the amount won by the punter in that horse race reduced by the amount invested by way of bet on the particular horse or horses which won the race, and not by the amount invested on the horse or horses which lost in that race. Hence, where a punter invests ₹ 100 each on two horses - horse A and horse B - in a particular horse race, and he wins ₹ 500 on the bet placed on horse A but loses the bet on horse B , the winnings of the punter from this horse race would be ₹ 400 (₹ 500 ₹ 100) and not ₹ 300 (₹ 500-₹ 200). 6. The provisions for deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which cannot be equated with a horse race. Thus, the Legislative intent at the time of introducing the amendment in Section 194B of the Act was to bring within its scope, money earned through games on television or electronic mode, in which people compete. In the above background, the learned representative for the assessee asserted the principle of ' ejusdem generis ' and ' noscitur a sociis ' are applicable in the instant situation. It was canvassed that as per the aforesaid principles, any word or a phrase takes its colour from the context in which same are used. Hence, the phrase 'or other game of any sort' in the instant situation refers to games akin to the games which are specifically mentioned in the text of Section 194B of the Act. The other principle is that of ' noscitur a sociis ', which means that a word is to be judged by the company it keeps. In other words, in case of doubt, meaning of a word can be ascertained with reference to the meaning of words associated with it. Reliance in this regard was placed on the decision of Hon'ble Supreme Court in the case of State of Bombay v. Hospital Mazdoor Sab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced via Finance Act, 1986, prescribed a flat rate of tax on Winnings from such games and states that income from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, shall be taxed in accordance with the provisions of that Section. Hence, Section 115BB of the Act itself distinguishes between other games and income earned through the activity of owning and maintaining race horses and excludes the latter. Notably, with the introduction of Section 115BB, sub-section (1) and (2) of Section 74A of the Act, which provided for set-off of losses with respect to lotteries etc., were omitted, but Sub-section (3), as discussed above, continued. Thus, as per the appellant, the Legislature has always treated lotteries and such other games differently from the activity of maintaining and owning horses. 13. It was further pointed out that identical issue was raised in the case of Bangalore Turf Club Ltd. v. Union of India [2014] 52 taxmann .com 290/[2015] 228 Taxman 234, wherein Single Judge Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f recipients of the 'stake money', alongwith their details/documents and confirmations stating that this amount has been included by them in their respective Returns of income were filed before the lower authorities, a copy of the said list has also been submitted in the Paper Book filed before us. Countering the allegation of the Assessing Officer that certificate was incomplete, it has been asserted that complete details, including PAN numbers and addresses of all recipients were provided. Furthermore, proviso to Section 201(1) of the Act is a beneficial provision, which has been introduced to avoid undue hardships and is retrospective in its applicability and is thus applicable for the instant year. In this regard, reliance was placed on the following judgments :- Gujarat Pipavav Port Ltd. v. Dy. CIT [2013] 40 taxmann .com 174/[2014] 149 ITD 23 ( Rajkot - Trib .) Radeus Advertising (P.) Ltd. v. Asstt . CIT [2017] 80 taxmann .com 353/164 ITD 384 ( Mumbai - Trib .) 16. The Ld. DR, on the other hand has merely placed reliance on the orders of the authorities below, and reiterated the reasoning contained in the respective or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically excluded from its ambit by the special provision. Thus, it was submitted that provisions of Section 194B of the Act were not applicable on 'stake money' even after the amendment. The learned representative had also raised an alternate plea that the recipients of 'stake money' have already paid the taxes on the 'stake money' received from the assessee and thus, assessee should not be treated as assessee in default in view of the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and provisions of Section 201(1) of the Act. 18. At the outset, we find that heading of Section 194B of the Act is Winning from lottery or crossword puzzle . It is a well settled principle of interpretation that the heading of a section should also be assigned meaning while interpreting the section. From the heading of the Section 194B of the Act it is amply clear that there is no whisper that Section 194B of the Act was intended to cover within its purview winnings from horse races. Now coming to the heading of Section 194BB of the Act, which reads as Winning from horse race . Going by the heading of the two section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding on the Department as it clarifies the understating of the provisions of the Act by the Revenue which cannot be disregarded by the income-tax authorities while construing the provisions of the Act. The ld. DR was not able to point out why the interpretation given in the CBDT Circular relied upon by the assessee should not prevail. We find that the Department has tried to indirectly tax what cannot be taxed by virtue of Circular issued by the CBDT , a situation which is impermissible in law. Thus, on this aspect also, we hold that 'stake money' is not liable to TDS u/s 194B of the Act. 6.2 We note that Mumbai Tribunal considered the issues in accordance with various provisions independently as per the directions of Hon ble Karnataka High Court 13 and held that section 194B/194BB are not applicable to stake money. 6.3 Respectfully following the same we also hold that stake money paid by assessee to the horse owners are not liable to TDS under section 194B or section 194 BB of the Act. Consequentially no disallowance could be made under section 40 (a) (ia) of the act in the hands of assessee. Accordingly ground No. 2-4 raised by assessee stands ..... X X X X Extracts X X X X X X X X Extracts X X X X
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